Ex-PM linked in dubious Mbowe Hotels Ltd deal

Former Prime Minister Edward Lowassa has been implicated in a questionable joint venture agreement between the National Housing Corporation (NHC) and Mbowe Hotels Limited (MHL) entered in 1997 where the latter acquired 75 stake of the building housing Club Bilicanas.

Mr Lowassa ran unsuccessfully for the Union presidency in general election last year through CHADEMA after defecting from CCM where he had been eliminated from the presidential race.

MHL is owned by the National Chairman of CHADEMA, Mr Freeman Mbowe -- and the company is on the verge of being evicted from the building due to outstanding rent arrears amounting to over 1 billion/-.

Mr Mbowe was yesterday quoted by some media outlets describing the debt as ‘political persecution’ meant to silence him, admitting, however, that there have been disputes between the two parties.

The building in question is among structures nationalised by the government through the Building Acquisition Act of 1971 and placed under the then Registrar of Buildings, the predecessor of NHC.

It is located on plots number 725-726/11 along Mkwepu and Indira Gandhi (Makunganya) streets.

“Through the agreement, NHC remained with only 25 per cent. This is not right because such shareholding structure is entered when NHC only provides land to a developer who foots all construction costs,” a source privy to the issue informed the ‘Daily News.’ He added that the MHL was given 75 per cent for the building; not the land.

‘‘This makes the contract questionable; what is worse is that the company pledged to expand the structure by setting up a three-star hotel and conference facilities but nothing has been done,” the source confided.

This newspaper was informed that in his capacity then as Minister for Lands, Housing and Urban Development, Mr Lowassa, through the Permanent Secretary in the Ministry, Mr J. M. Mgwheno, wrote to the then Director of NHC, Mr Haruna Masebu, directing the housing corporation to sell the building to MHL.

The directive was made through a letter dated March 24, 1994, which has been seen by ‘Daily News,’ instructing NHC to sell the building through a tender “but with consideration of MHL.”

It has come to light that the company had way back in 1993 made a request to the State House to purchase the property through a letter dated May 20, 1993 in which it claimed it wanted to expand the structure at a total cost of 720m/-.

“However, the snag (in making the expansion and renovation) is that we do not own the property hence making the whole endeavour a very risky one and that is why we are appealing to your office to give us a permission to purchase the ‘dilapidated’ property,” reads part of the letter to the State House.

According to the letter, MHL claimed it wanted to construct an ultra-modern international multi-purpose function hall by renovating the old backyard and renovating the right wing into an international standard casino. On the proposal there was also a plan to upgrade the left wing into a two-storey 100-room international standard hotel.

Subsequently, the then Secretary to President Ali Hassan Mwinyi, Ambassador Paul Rupia, wrote to the Board Chairman of NHC -- at that time, Mr Emillius C. Mzena, to consider the request, which he eventually advised against in a letter written on August 26, 1993.

Mr Mzena reasoned that allowing the request for purchase by MHL will prompt other tenants to make same demands for NHC buildings in prime areas. After failing to get a nod from the presidency, the company then approached Mr Lowassa who made directives that finally saw MHL and NHC signing the deal with the shareholding structure of 75 and 25 per cent, respectively.

“After too much pressure the board and management of NHC finally allowed for the joint venture in which each party would have 50 per cent stake but this was rejected,” the source confided to this paper.

However, almost 20 years since the joint venture agreement was entered, MHL did not make any expansion as claimed and this prompted NHC to propose a review of the contract which the company rejected.

It was at this juncture that NHC issued MHL with a notice to terminate the joint venture for re-development and co-ownership of the property on February 16, 2015, which, among others, required the company to pay outstanding rent arrears.

Even with the notice, MHL did not settle the arrears and thus on June 24, this year, the state-owned corporation issued a notice to terminate the lease agreement.

Source:DailyNews